Dear fellow Shareholders
It is indeed a proud privilege to address you at the 30th Annual General Meeting ofyour Company. It has been an eventful year for India and the hospitality industry. TheTravel & Tourism industry worldwide has achieved a faster growth than the globaleconomy for the sixth successive year as per the Economic Impact 2017 India Studypublished by the World Travel & Tourism Council (WTTC). Travel and Tourism industry'stotal contribution to India's GDP was 9.6% in 2016. This industry also contributed to 9.3%of the 40.3 million jobs in India. Our Honorable Prime Minister Narendra Modi rightlycalled Tourism as one of the major pillars of the Economy. Amongst his priorities has beento reduce corruption and to put India on the world stage through his diplomacy. He hasalso tried to improve India's ranking in Ease of Doing Business'. He has emphasisedon Swachh Bharat & Yoga. All these help the Tourism industry. In order to eradicateBlack Money' he had to spring an element of surprise on November 8th bydemonetizing the 500 rupee and 1000 rupee notes. It had a greater impact on our hotel assome events booked were abruptly cancelled or scaled down. Since this took place in thebusy tourist season foreign tourists were inconvenienced. Despite the inconveniencecaused to farmers and lower income citizens majority of the people have appreciated themove and it will benefit India in the long run.
However the recent implementation of the GST bill from July 01 2017 whereby allhotel rooms which are sold at a rate of over INR 7500 per day would attract a GST of 28%may make India seem to be a very expensive destination for foreign tourists. The tax rateon hotels in Malaysia and Thailand are 7% while Singapore also has a much lower tax ratethan 28%. Despite the excellent move by the Government to allow e-Tourist Visas tocitizens of 155 countries our foreign tourist arrivals have only reached 9 million ascompared to 55 million visiting China 12 million visiting Singapore and 26 millionvisiting Thailand. Most economists agree that it is the revenue earned by a country fromtourism is more important as that is what contributes to the GDP. As per WTTC theforeign exchange earnings from Tourism in India amounted to US $22.8 billion while thecomparable figure for Thailand was US $53.7 billion. By levying a 28% GST on highercategory rooms the Government will alienate the high spending tourists from coming toIndia.
Even our own leisure travellers will find it cheaper to go for a holiday abroad to oneof the nearby countries in South East Asia or have their family weddings in Thailand.
I as Vice Chairman of the World Travel and Tourism Council in India have met and madea representation on GST to the Ministry of Tourism officials to offer some reliefs to thehospitality industry which not only employs more people than most industries and is alsoa leading earner of valuable foreign exchange. Our hospitality industry unfortunately doesnot receive the recognition it deserves. If Ease of Doing Business' is our goalthen one flat rate of 12% for all would have made it less complicated and touristfriendly. Some of the better rooms in our hotel could have a rate of over INR 7500 whileothers may be sold at less than INR 7500 on the same day and attract the lower GST rate of18%. The GST Council is very receptive so we are confident that our concerns will beaddressed.
Fortunately our hotel will be impacted to a lesser extent as our room rates for amajority of the rooms are lower than INR 7500 for most of the year. Moreover we hadalready shifted our marketing strategies and concentrated on the growing domestic market.
India is the largest Aviation market in the world and each airline is adding newaircraft to their fleet. They have kept airfares at reasonable levels due to competitionand the fall in the prices of Aviation Turbine Fuel. Moreover they are providing moreflights to Goa and connecting more cities with direct flights to Goa. There has been asurge in traffic of low cost airlines at Goa airport. The Airport Authority of India hadalready commissioned a larger new Terminal building with six new Aerobridges at DabolimAirport a few years ago and they have added two more Aerobridges recently. They have alsocirculated a tender of INR 5000 million for rebuilding the old Terminal building. They arealso constructing a parallel taxiway to achieve more frequent arrivals and take-offs perhour. These additions will be adequate for the needs of Goa for a long time.
Connectivity has improved further with the introduction of several rail options. ALuxury train has just been commissioned between Mumbai and Goa recently and an Expresswayis being built to connect Mumbai and Goa. The future of Goa tourism especially for hotelsin the medium rate category seems especially bright. A survey conducted by Make My Tripafter completion of one month of GST has concluded that there has been a significant dropin occupancies of highly priced hotels which charge a GST of 28%. Our hotel was built inthe year 1990 at a reasonable cost per room and thus will be able to compete moreeffectively against newly built hotels which will need to keep their room rates high toservice their loans. Our Company is virtually debt free this year. Our RevPAR has beensteadily increasing. In the year 2014-15 it was INR 4037 and in the year 2016-17 whichjust closed it was INR 5279.
Our Average Occupancy for the year was almost 80% which is one of the highest in Goa.This was partly because of better performance in the traditionally low periods between Mayand September. Goa has now become a year round destination and a favourite for weddings.We hope that there will be emphasis on law and order and tourism friendly policies astourism is very fragile and is the backbone to the survival of Goa.
We have maintained a high dividend percentage for the last several years and willcontinue this policy. This year we achieved a 53.1% increase in Gross profits to INR143.58 million. Of all the listed hotel Companies in India our Company stood 4th in termsof Net Profits as a percentage of Sales. Our performance this financial year is morecreditable as it was achieved when the GDP growth reduced from 7.9% to 6.6%. It is alsocommendable since demonetization affected high value discretionary spending. I amoptimistic about the future of our Company.
In closing I would like to place on record my gratitude to the entire Board ofDirectors for their inputs and suggestions.
I would like to thank the Central Government especially the Ministries of FinanceTourism Civil Aviation External Affairs and also the Government of Goa for theircontinued assistance to the Tourism industry. I would also like to thank the Bank ofBaroda and Bank of India for their support. The Company would not have achieved the aboveresults without the help of the Management Executives and Staff of the Caravela BeachResort who are our most important asset and deserve immense praise. A special thanks toour business associates tour operators and travel agents. Last but not the least I wouldlike to thank all you Shareholders for your continued faith in our Company.
Sunder G. Advani
Chairman & Managing Director
Advani Hotels & Resorts (India) Limited